An Unsustainable Public Worker Gravy Train Bubble

Andrew Biggs (AEI) and Jason Richwine (Heritage) provide evidence in today's WSJ of the "public worker gravy train" in California, where government workers are compensated up to 30% more generously than their private-sector counterparts in large private companies. Reasons for the huge public-sector premium? They point to three sources:1. Public-sector pension programs are more generous than those in the private-sector. 2. Public-sector medical benefits, both while working and during retirement, are more generous for government workers than comparable workers in the private sector.3. Government employees have much greater job security than workers in the private sector, equivalent to a 15% compensation premium. Taken together, those additional, and very generous non-wage benefits for government workers in California translate into a whopping 30% compensation premium, i.e. "gravy" (paid for by Golden State taxpayers of course), compared to total compensation at private firms (controlling for age, education, experience, etc.). MP: The chart above compares jobless rates between private and public sector employees nationally, on an annual basis back to 1976, and shows that private sector workers face an average unemployment rate (6.6%) that is almost twice as high as the average rate for government workers (3.4%). The fact that government workers are 50% less likely to be unemployed in any given year than private sector employees (and work in a "recession-proof industry") is part of the reason that Biggs and Richwine find a 15% compensation premium for government workers. Commentator Mike Rosen describes the "public worker gravy train" as "unsustainable bubble" in today's Denver Post:"Several financial and economic bubbles have popped in recent years. Now, the bubble of unsustainable compensation levels for federal, state and local government employees is bursting.Once upon a time, those who opted for a career in what used to be called "public service" did so understanding they'd trade off lower pay for more job security and less performance pressure than in the private sector. Nowadays, government employees are not only better paid than the private sector average but also enjoy far better health insurance at lower costs along with lavish retirement benefits, the product of rapidly expanding and aggressive public sector unions that have formed an incestuous relationship with the politicians they fund and elect.The problem is particularly acute at the state and local level, since those governments have to balance spending against current revenues. They can't run deficits like the feds. And in this economy, the spending gaps are way too large to be closed with tax increases without making the economy even worse, resulting in yet lower revenues."

Ontario’s public sector workers tend to be far better off than private employees, a new study says, even as the province grapples to slay its growing deficit and curtail spending — a full half of which is dedicated to salaries, wages and benefits.

Compensation packages for Ontario public servants have risen so much during the last ten years of Liberal rule it’s outpaced inflation and new while adding billions to the debt and deficit, a new Fraser Institute report finds.

The wheels seem to have fallen off (job growth), and that might position the housing and consumer markets to face a little bit greater risk
Canada Friday will probably report it added 20,000 jobs in August, economists say, a level that would keep it on track for the weakest annual payroll growth in a non-recession year since 2001.

OTTAWA — When it comes to obtaining higher education, women are continuing to outpace men, while newcomers are arriving in Canada with more post-secondary experience than the average person who was born here.
According to the latest figures released Wednesday by Statistics Canada, women ages 25-64 now hold 54 per cent of all university degrees, and 60 per cent of the degrees among young adults.

Gas in Vegas is a dollar cheaper a gallon than in the Golden State, or so a friend and recent LA transplant tells me. He went on to say the top tax rate in California is over 13%, while, of course, Nevada has no state income tax.

My short answer is: “no.” Debt is a stock concept, not a flow one. To determine whether something is “sustainable” or not (whether it be the government’s fiscal condition, a family’s personal finances, environmental quality, one’s physical health, or even personal relationships) requires a look at the dynamics of the situation, not just a snapshot.